Road to Expo: A ‘New Normal’ For the Pizza Industry

Seismic shifts are reshaping the landscape of the pizza business, and the chains are the companies largely benefiting. The pace of change is speeding up, leaving many independent pizzerias confused about their business priorities. This “new normal” demands more than just great pizza to remain relevant and successful.

Let’s examine a few astounding proof points:

Digital and online ordering is growing 300 percent faster than dine-in ordering. (This means billions of dollars in the U.S. alone will shift from dine-in to delivery in the years ahead.) For instance, Domino’s growth is being driven by digital sales. As of 2016, the sales from digital channels were 52 percent of the company’s global sales, and grew by 19 percent over the year before — 13.8 times as fast as non-digital sales growth.

The gap between independent average unit volumes and the higher-revenue chain AUVs correlates almost directly to the volume of sales that chains are processing on the digital platform — about $300,990.

New ordering platforms including UberEats, Caviar, Postmates and DoorDash are growing from collectively posting $400 million in revenue in 2014 to an expected $1.6 billion this year. Food delivery is about to dramatically change and redirect billions in restaurant revenue.

How are trends like these impacting the independents? In 2017, it is estimated that the U.S. pizza industry generated roughly 8 percent of the total U.S. restaurant revenue ($46.6 billion) despite the fact that America’s near-64,000 “pizza” establishments account for 9.4 percent of all U.S. restaurants. Revenue in 2017 is expected to increase 5.8 percent from 2016’s figures, with segment AUVs growing to an estimated $732,118.

In many ways, however, chains are dominating. Again, look at Domino’s, which saw 2016 U.S. sales up 12.6 percent on top of 16.9 percent growth in 2015. Little Caesars and Papa John’s are in pretty cheery moods, too, with 5.6 percent and 8.1 year-over-year increases, respectively. The biggest players will continue to unveil innovative new ways to order, forcing independent operators to increase their investment into tech. Chain pizza brands in general have grown in recent years at approximately twice the rate of independents. The challenge for “indies” is to reverse that trend.

Overall, these seismic shifts in technology and convenience will see pizza chains compete against non-traditional players and segments. Change will occur at a much faster pace than ever before. For example, delivery-only concepts (sometimes referred to as “dark kitchens”) are growing faster than any other segment globally — and the charge is being led by pizza players.

I’ve introduced you to some of the facts and some of the challenges I see facing independent pizzerias in my work as a global restaurant consultant. I’ll be at Pizza Expo in March to help identify opportunities in this emerging landscape.

In my workshop Monday, March 19 — Strategic and Sustainable Market-Domination Tools for Pizza Restaurants — I will provide methodologies and diagnostic tools focused on sharpening your competitive proposition and meaningfully enhancing the guest experience to compete successfully in 2018. We’ll go in depth in this four-hour session.

During my Tuesday morning Super-Seminar — Pitfalls and Opportunities for Today’s Independent Pizzeria — I will further outline the challenges facing the modern pizza restaurant, as well as the trends reshaping the industry. Then I’ll offer strategies for profiting in the future.

Then on Tuesday afternoon I’ll engage in a conversation with two of the pizza industries bright stars, Tony Gemignani and Sean Brauser. Famed for his pizza-making skills, Tony is an owner in 16 pizzerias; Sean built the Ohio chain Romeos and is now three years in with Pizzafire, a fast-casual chain with over $20 million in sales. We’ll talk about profiting in pizza during this era of disruption.

Aaron Allen has represented more than 10,000 restaurants across six continents as an industry consultant. He’s worked with some of the top pizza companies in the world, including high-volume independents, emerging brands and multi-national chains.

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